“We have
completed our initial reserves estimation and are very
pleased to announce that our current mean estimate of the
recoverable reserves in the field is 750 billion cubic feet
(bcf) plus 40 million barrels of condensate. Combined these
add to 165 million barrels of oil equivalent (mmboe) . This
is more than double our pre-drill estimates." said Mr Greig
Gailey, Chief Executive Officer, Fletcher Challenge
Energy.

Reserve estimates are best characterised using
statistical descriptions. At this early stage the Mean
reserve is the most representative single number in the
broad range of possible outcomes. The range is summarised
using industry definitions in the table below. The “P90”
category defines reserve quantities that Fletcher Challenge
Energy consider have a 90 per cent chance of ultimately
being met or exceeded. This category is often referred to
as Proven reserves. The “P10” category represents a reserve
level that is considered to only have a 10 percent chance of
ultimately being exceeded, and is often referred to as the
Possible reserves. The Mean category represents the average
of all expected outcomes.

The range of Pohokura field
reserves is currently estimated as
follows:

Fletcher Challenge Energy’s
Chief Operating Officer, Lloyd Taylor, noted that "The field
is still in the early appraisal stage. However, it is
clearly a commercial discovery by virtue of the reserves
established to date, high condensate yield, relatively low
potential development cost and proximity to market. Testing
of the Pohokura-2 well achieved a flow-rate of 30.7 mmscf
per day of gas, plus 2670 bbl per day condensate. This
result was constrained by surface equipment capacity and was
attained with only 228 psi draw down against a reservoir
pressure of 6253 psi, thus confirming the presence of
exceptional quality sands within the reservoir.”

The
upside to the currently estimated mean reserves is
predominantly to the north of Pohokura-2, an area of
structural uncertainty. Subject to Joint Venture
consideration and approval, this uncertainty will be
addressed by a 3D seismic survey over the field in the
coming summer. Following this it is possible that, in time,
another appraisal well may be drilled to the north of
Pohokura-2 in order to confirm the northern most extent of
the field".

Although volumetrically less significant,
another area of uncertainty is that of the reservoir
continuity to the south of Pohokura-1 towards the coast.
Subject to Joint Venture consideration, it is probable that
an extended reach well will be drilled from the coast
targeting an offshore bottom-hole location with the
objective of confirming southern reservoir development and
continuity. Once the Joint Venture has considered the
requirements for further appraisal of the discovery, a
comprehensive program of community consultation will
commence. This is likely to start late in the third quarter
of this year.

"The results to date are outstanding and a
tribute to the teams involved. We look forward to
including Fletcher Challenge Energy’s share of reserves in
our year-end numbers", said Greig Gailey.

In drilling the
discovery and subsequent appraisal well the Joint Venture
has spent approximately $42 million. A further $35 million
may be spent in further appraisal and development studies in
advance of development sanction. The latter is targeted
within two years. Development expenditure could range from
$350 million in the Mean case to more than $500 million in
the upside (P10) reserves case. First gas deliveries are
targeted for as early as 2004.

Lloyd Taylor noted that
“The Pohokura gas/condensate discovery has all the elements
of a major petroleum development, with all the attendant
benefits for the regional community and the nation. It will
extend gas supply beyond Maui field life and generate
significant foreign earnings from condensate export.”

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